Four benefits of investing in an income unit trust
1. Safe short-term investment:
Income unit trust are a good, safe place for you to park your money over a six to 12 month period. So instead of holding cash, which inflation will erode and which won’t produce a return, opt for an income unit trust instead.
2. Minimal risk:
Income unit trust are near to the lowest risk end in the unit trust risk spectrum. Legislation keeps them as low risk as possible within their mandates. Furthermore, they must have financial authority approval and are closely monitored by the Financial Services Board. Strict duration rules prevent fund managers from investing in any financial security for more than 24 months.
3. You have fast access to your money:
In most cases, you can draw your investments after one day’s notice.
4. Broad access to the marketplace:
Fund managers are tasked with diversifying the fund’s investments across a range of rated institutions. This lowers the overall risk of the income unit trust you’re investing in.
Before you invest in an income unit trust, know this
While income unit trusts are a great place to park ‘emergency cash’, the optimal minimum period for investing in an income unit trust unit is 12 months, says the team of the experts behind The South African Investor. Don’t keep your money in these funds for longer than two years because it’ll never beat inflation in the long-term.